The year 2025 will have been one of great maneuvers in the paper industry. After the takeover of paperboard packaging and paper manufacturer DS Smith by International Paper or Schumacher Packaging by Mondi another major merger project is taking shape, this time in the graphic paper sector. Today, Finland's UPM and South Africa's Sappi announced that they have signed a non-binding letter of intent to create an independent, 50/50 joint venture.
This future entity would combine all of UPM Communication Papers (with 2024 sales of 2.953 billion euros) and Sappi's European graphic paper activities (2.03 billion euros on this continent in 2025). The two groups indicate that this structure would operate with its own governance, autonomous financing and the ability to steer its decisions independently.
Twelve industrial sites concerned, eight UPM and four Sappi
A total of twelve paper mills are involved in this joint venture.
For UPM, these are the Kymi, Rauma (including RaumaCell) and Jämsänkoski (line 6) mills in Finland, Nordland (lines 1 and 4), Augsburg and Schongau in Germany, Caledonian in the UK and Blandin in the USA.
For Sappi, the integrated sites would be Kirkniemi in Finland, Ehingen in Germany, Gratkorn in Austria and Maastricht in the Netherlands.
The transaction, still under negotiation, values the combined assets at 1.42 billion euros, excluding synergies. UPM, which would contribute 1.1 billion euros, would receive 613 million euros in cash. Sappi, with a contribution of 320 million euros, would receive 139 million euros.
A merger in response to a declining market
The two paper groups cite a strategy of industrial rationalization in response to the continuing deterioration of the graphic paper market: persistent overcapacity, pressure on prices, rising energy costs, and increased competition from imports.
The new entity is said to be aiming for annual savings of 100 million euros, by reallocating volumes to the most competitive machines, simplifying product ranges and optimizing purchasing and logistics.
UPM specifies that this operation would reinforce its trajectory of gradual withdrawal from the graphic markets, in favor of growth segments such as bioproducts and renewable materials. The proportion of sales generated by graphic paper, currently estimated at 25% of sales, would thus be significantly reduced.
Awaiting regulatory green light
The agreement is subject to a number of conditions: signature of the final contracts expected in the first half of 2026, approval by Sappi shareholders, finalization of financing, and above all review by the competition authorities, notably in Brussels, Washington, London and Beijing.
Completion is expected by the end of 2026. In the meantime, each company will continue to manage its operations separately, with no coordination between activities or data sharing.
